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Macrealty June 2011 Market Update


Blog by Patricia Houlihan - Personal Real Estate Corporation | June 23rd, 2011


With the recent election of a majority Conservative government, what does this mean for the housing sector?

Most financial analysts agree that the business-friendly Conservatives will continue to prioritize the health of the overall economy, a message that will be well-received by the investment community. This, combined with the first majority government that Canada has seen in over half a decade, provides a platform of stability that financial markets crave. These two factors will amplify Canada’s already strong economic reputation and will give us the best chance of having a strong, stable economic base in the near- and mid-term.

"The more stable government is good news for foreign investors, particularly as balancing the budget remains high on the agenda," says Jennifer Lee, senior economist with BMO Capital Markets. "With its majority hold, the Conservatives will likely blunt the impact of the new official opposition, the NDP. And with the Bloc Quebecois losing official party status, separatist issues will retreat to the back."

Policy-wise, the Conservatives did not outline any new housing-related initiatives during the election. However, in their last term, they moved to increase the insurance requirements of the Canada Housing and Mortgage Corporation (CMHC) in order to cool off the run-up in real estate prices in certain jurisdictions. These new rules effectively tighten lending requirements, which is seen by many as a necessity during this low-rate environment to deter boom-and-bust real estate cycles.

The rapid appreciation in prices over the past year, especially in some areas of the Lower Mainland, is getting the attention of government officials. It is believed that these prices have been driven up by Chinese investment, as these neighbourhoods represent the areas where investor class Chinese immigrants tend to settle. That said, the Conservatives worked very hard to court the new Canadian vote in the previous election and their platform seems to indicate that they will increase the number of economic immigrants – at the expense of other immigration categories – rather than reduce them.

So while it is unlikely that this government will do anything other than encourage economic immigration, there is a growing concern that locals are being priced out of the market. Whether government policy is put in place to rectify this is something to watch, although, given that it really only affects Vancouver, it seems unlikely.

Overall, it seems as though this new Conservative majority government is positive for the housing market. That said, government policy and leadership only plays a small role in the economy. When things go well, they tend to get too much credit. And when things go poorly, they receive a disproportionate amount of the blame.

If you would like more information, please do not hesitate to call or email me!

Patricia
(604)376-7653
phoulihan@deepcovehomes.ca



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